================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

                  For the quarterly period ended June 30, 2007
                                                 -------------

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

           For the transition period from ____________ to_____________

                        Commission File number 0 - 24012

                               KODIAK ENERGY INC.
                      -------------------------------------
             (Exact name of registrant as specified in its charter)


             Delaware                                65-0967706
    -------------------------------                ----------------
    (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)               Identification No.)


                     734 7th Avenue S.W. Calgary, AB T2P 3P8
            --------------------------------------------------------
               (Address of principal executive offices - Zip code)

                                 (403) 262-8044
                              --------------------
              (Registrant's telephone number, including area code)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Securities  Exchange  Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.

     Yes  X     No
         ---       ---

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

     Yes        No  X
         ---       ---

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934  subsequent to the
distribution of securities under a plan confirmed by a court.

     Yes  X     No

         ---       ---

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 93,284,368

Transitional Small Business Disclosure Format (Check one):  Yes      No X
                                                                ---    ---


                                       1
<PAGE>

                               KODIAK ENERGY INC.
                                      INDEX


PART I.  FINANCIAL INFORMATION                                                3

ITEM 1.  FINANCIAL STATEMENTS                                                 3

          Consolidated Balance Sheets as of June 30, 2007
           (unaudited) and December 31, 2006                                  3

          Consolidated Statement of Shareholders' Equity
           (unaudited) for the six months ended June 30, 2007                 4

          Consolidated Statements of Operations (unaudited)
           for the six months ended June 30, 2007 and 2006                    4

          Consolidated Statements of Cash Flows (unaudited)
           for the six months ended June 30, 2007 and 2006                    5

          Notes to Consolidated Financial Statements                          6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION           19

ITEM 3.  CONTROLS AND PROCEDURES                                             22


PART II. OTHER INFORMATION                                                   22

ITEM 1.  LEGAL PROCEEDINGS                                                   22

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                           23

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                     23

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                 23

ITEM 5.  OTHER INFORMATION                                                   23

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                    24











                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

KODIAK ENERGY, INC.
Consolidated Balance Sheets
(Development Stage Company Going Concern Uncertainty - Note 1)
--------------------------------------------------------------------------------
                                                  June 30          December 31
                                                    2007              2006
                                                (Unaudited)         (Audited)
--------------------------------------------------------------------------------
Assets

Current Assets:
     Cash                                     $     1,263,438    $      448,346
     Accounts Receivable                              491,763           685,975
     Prepaid Expenses and Deposits (Note 4)           253,737           196,838
                                              ----------------------------------
                                              $     2,008,938    $    1,331,159
                                              ----------------------------------
Other Assets (Note 5)                                  55,080            49,860
                                              ----------------------------------

Capital Assets (Notes 3 and 6):
     Oil & Gas Properties                           7,451,861         1,270,253
     Funiture & Fixtures                               83,473            55,803
                                              ----------------------------------
                                                    7,535,334         1,326,056
--------------------------------------------------------------------------------
                                              $     9,599,352    $    2,707,075
--------------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current Liabilities:
         Accounts Payable                           1,518,405           585,253
         Accrued Liabilities                          654,392           273,850
         Notes Payable (Note 7)                     3,000,000                 -
                                              ----------------------------------
                                                    5,172,797           859,103
                                              ----------------------------------

Asset Retirement Obligations (Note 8)                 106,743            90,911
                                              ----------------------------------

Deferred Income Taxes (Note 11)                        55,480                 -
                                              ----------------------------------

Shareholders' Equity
   Share Capital (Note 9):
      Authorized:
      300,000,000 (2006 - 100,000,000)
      Common Shares Par Value .001 Each
      Issued & Outstanding 93,284,368
      (2006 - 89,946,468)Common Shares                 93,284            89,946
      Shares Issuable (Note 9)                              -           538,328
      Additional Paid in Capital                    8,933,473         5,143,608
      Deficit Accumulated During the
               Development Stage                   (5,024,870)       (4,063,776)
      Contributed Surplus (Note 10)                   348,252            69,169
      Other Comprehensive Gain (Loss)                 (85,807)          (20,214)
                                              ----------------------------------
                                                    4,264,332         1,757,061
--------------------------------------------------------------------------------
                                              $     9,599,352    $    2,707,075
--------------------------------------------------------------------------------

(See accompanying notes to the consolidated financial statements)



                                       3
<PAGE>
<TABLE>
<CAPTION>
KODIAK ENERGY, INC.
Unaudited Consolidated Statements of Shareholders' Equity
For the Six Months Ended June 30, 2007
(Development Stage Company Going Concern Uncertainty - Note 1)

                                                                  Deficit
                                                                Accumulated    Accumulated
                             Number of             Additional   During the       Other                                Total
                              Common                Paid in     Development   Comprehensive  Contributed   Shares  Shareholder's
                              Shares     Amount     Capital        Stage          Loss         Surplus    Issuable    Equity
                            ----------------------------------------------------------------------------------------------------
<S>                         <C>         <C>       <C>          <C>              <C>           <C>        <C>         <C>
Balance at Dec. 31, 2006    89,946,468  $ 89,946  $ 5,143,608  $  (4,063,776)   $  (20,214)   $  69,169  $  538,328  $ 1,757,061

Net loss                             -         -            -       (961,094)            -            -           -     (961,094)
Foreign currency
translation                          -         -            -              -       (65,593)           -           -      (65,593)
                                                                 -------------------------                           -----------
Total comprehensive loss                                            (961,094)      (65,593)

Issuance of common stock     3,337,900     3,338    3,789,865              -             -            -    (538,328)   3,254,875
                                                                                                279,083
Stock-based compensation             -         -            -              -             -                        -      279,083
--------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2007    93,284,368  $ 93,284  $ 8,933,473  $  (5,024,870)   $  (85,807)   $ 348,252  $        -    4,264,332
================================================================================================================================

</TABLE>

KODIAK ENERGY, INC.
Unaudited Consolidated Statements of Operations
(Development Stage Company Going Concern Uncertainty - Note 1)
=================================================================
<TABLE>
<CAPTION>


                                                         Three                        Six         Cumulative
                                                         Months                      Months     Since Inception
                                           Three         Ended         Six           Ended       April 7, 2004
                                           Months       June 30,      Months        June 30,      to June 30,
                                           Ended         2006         Ended           2006           2007
                                          June 30,    (Restated -    June 30,      (Restated -    (Restated
                                            2007         Note 2)       2007          Note 2)       - Note 2)
                                         ----------------------------------------------------------------------
<S>                                      <C>          <C>           <C>           <C>           <C>
REVENUES, net of royalties               $       42   $         -   $      427    $          -  $       27,561
                                         ----------------------------------------------------------------------

EXPENSES

 Operating                                      964             -       11,600               -          25,172

 General and Administrative                 404,208       237,622      574,906         434,034       1,907,082

 Stock-based Investor Relations Expense           -       337,500            -         337,500         337,500

 Stock-based Compensation                   155,269             -      279,083               -         348,252

 Depletion, Depreciation and Accretion       12,622         2,879       22,143           5,148       1,530,399

 Interest Expense                            18,818             -       18,818               -         827,629
                                         ----------------------------------------------------------------------

                                            591,881       578,001      906,550         776,682       4,976,034
                                         ----------------------------------------------------------------------

 Loss Before Other Expenses                (591,839)     (578,001)    (906,123)       (776,682)     (4,948,473)
Other Expenses (Income)

 Loss from valuation adjustment                   -             -            -               -          25,000

 Interest Income                               (267)            -         (509)              -          (4,083)
                                         ----------------------------------------------------------------------
                                                                -                            -          20,917
                                               (267)                      (509)

 Loss before income taxes                  (591,572)     (578,001)    (905,614)       (776,682)     (4,969,390)


Provision for Deferred Income Taxes          55,480             -       55,480               -          55,480
                                         ----------------------------------------------------------------------

NET LOSS                                 $ (647,052)  $  (578,001)  $ (961,094)   $          -  $   (5,024,870)
                                         ----------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements)

                                       4
<PAGE>

KODIAK ENERGY, INC.
Unaudited Consolidated Statements of Cash Flows
(Development Stage Company Going Concern Uncertainty - Note 1)
<TABLE>
<CAPTION>
                                                         Three                        Six         Cumulative
                                                         Months                      Months     Since Inception
                                          Three           Ended         Six          Ended       April 7, 2004
                                          Months         June 30,      Months       June 30,      to June 30,
                                          Ended           2006         Ended          2006           2007
                                         June 30,      (Restated -    June 30,     (Restated -    (Restated
                                           2007           Note 2)       2007         Note 2)       - Note 2)
                                       ------------------------------------------------------------------------
<S>                                    <C>            <C>           <C>           <C>           <C>
OPERATING ACTIVITIES
NET LOSS                               $   (647,052)  $   (578,001) $   (961,094) $   (776,682) $   (5,024,870)
Adjustments to reconcile net loss to
net cash used in operating activities:
   Depletion, Depreciation and
    Accretion                                12,622          2,879        22,143         5,148       1,530,398
   Interest Expense                          18,818              -        18,818             -         827,629
   Stock-Based Investor Relations
     Expense                                      -        337,500             -       337,500         337,500
   Stock-Based Compensation                 155,269              -       279,083             -         348,252
   Provision for Deferred Income Taxes       55,480              -        55,480             -          55,480
   Contributions to Capital                       -              -             -             -             900
   Loss from Valuation Adjustment                 -              -             -             -          25,000

Changes in Non-Cash Working Capital
   (Note 16)                                 31,000        128,354       (79,188)        4,300          26,590
                                       ------------------------------------------------------------------------

Net Cash Used In Operating Activities      (373,863)      (109,268)     (664,758)     (429,734)     (1,873,121)

Investment Activities:
  Additions To Capital Assets            (3,227,253)      (523,780)   (4,895,363)     (841,162)     (7,746,810)
  Additions To Other Assets                  (4,508)             -        (5,220)       (4,100)         55,080)
                                       ------------------------------------------------------------------------

Net Cash Used In Investment Activities   (3,231,761)      (523,780)   (4,900,583)     (845,262)     (7,801,890)

Financing Activities
  Shares Issued and Issuable              1,711,098      1,811,732     3,446,026     3,043,941       8,024,256
  Notes Payable                           3,000,000              -     3,000,000             -       3,000,000
                                       ------------------------------------------------------------------------
Net Cash Provided By Financing
  Activities                              4,711,098      1,811,732     6,446,026     3,043,941      11,024,256
                                       ------------------------------------------------------------------------

Foreign Currency Translation                (65,482)           119       (65,593)        3,092         (85,807)
                                       ------------------------------------------------------------------------

Net Cash Increase                         1,039,992      1,178,803       815,092     1,772,037       1,263,438
Cash beginning of period                    223,446        783,885       448,346       190,651               -
                                       ------------------------------------------------------------------------

Cash end of period                     $  1,263,438   $  1,962,688  $  1,263,438  $  1,962,688  $    1,263,438
                                      -------------------------------------------------------------------------
</TABLE>

(See accompanying notes to the consolidated financial statements)



                                       5
<PAGE>

KODIAK ENERGY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Six Months Ended June 30,
2007 and 2006 Stated in US dollars


1. ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY

The accompanying consolidated financial statements include the accounts of
Kodiak Energy Inc. and subsidiaries (collectively "Kodiak", the "Company", "we",
"us" or "our") as at June 30, 2007 and December 31, 2006 and for the three and
six months ended June 30, 2007 and 2006 and for the cumulative period from April
7, 2004 (inception)until June 30, 2007, and are presented in accordance with
generally accepted accounting principles in the United States of America ("U. S.
GAAP").

The Company was incorporated under the laws of the state of Delaware on December
15, 1999 under the name "Island Critical Care, Corp." with authorized common
stock of 50,000,000 shares with a par value of $0.001. On December 30, 2004 the
name was changed to "Kodiak Energy, Inc." and the authorized common stock was
increased to 100,000,000 shares with the same par value. On January 17, 2005 the
Company affected a reverse split of 100 outstanding shares for one share. These
consolidated financial statements have been prepared showing post split shares
from inception. The Company was engaged in the development of the manufacture
and distribution of medical instrumentation and it became inactive after the
bankruptcy outlined below.

The Company is in the development stage and its efforts have been principally
devoted to the raising of capital, organizational infrastructure development and
the acquisition of oil and gas properties for the purpose of future extraction
of resources.

Bankruptcy
----------

On February 5, 2003 the Company filed a petition for bankruptcy in the District
of Prince Edward Island, Division No. 01-Prince Edward Island Court No. 1713,
Estate No. 51-104460, titled "Island Critical Care Corp.". The Company emerged
from bankruptcy pursuant to a Bankruptcy Court Order entered on April 7, 2004
with no remaining assets or liabilities and adopted Fresh Start Accounting.

The terms of the bankruptcy settlement included the authorization for the
issuance of 150,000 post split restricted common shares in exchange for $25,000,
which was paid into the bankruptcy court by the recipient of the shares.

The Company emerged from bankruptcy as a development stage company.

Going Concern Uncertainty
-------------------------

These consolidated financial statements have been prepared assuming the Company
will continue as a going concern, which presumes the realization of assets and
discharge of liabilities in the normal course of business for the foreseeable
future. The Company has not generated positive cash flow since inception and has
incurred operating losses and will need working capital for its future planned
activities. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Continuation of the Company as a going concern
is dependent upon obtaining sufficient working capital to finance ongoing
operations. The management of the Company has developed a strategy to address
this uncertainty, including additional loans from officers and equity and debt
financing; however, there are no assurances that any such financings can be
obtained on favorable terms, if at all. These financial statements do not
reflect the adjustments or reclassification of assets and liabilities that would
be necessary if the Company were unable to continue its operations.

2. RESTATEMENT

In November, 2006, it was determined that it was necessary to restate the
financial results for the year ended December 31, 2005 and for the periods ended
March 31, 2006 and June 30, 2006. The purpose of the restatements was to correct
errors found in accounting for transactions resulting from a lack of adequate
procedures necessary to insure that records were maintained in reasonable detail
to fairly reflect the transactions of the Company in the start up phase of
operations. More specifically the errors found are outlined as follows:



                                       6
<PAGE>

* Capitalization of items which should have been expensed under the successful
efforts method of accounting for oil and gas property
* Not recognizing the beneficial conversion feature of debt payable in common
shares of the Company
* Certain expenses paid after year end not being accrued for at period end
* Expensing costs relating to issuance of common shares
* Calculation errors made in the translation of Canadian operations to U.S.
dollars

Effects of the restatement by line item follow:

Unaudited Consolidated Balance Sheets
                                         June 30,
                                          2006                        June 30,
                                      As Previously    Impact of        2006
                                         Reported       Errors        Restated
                                      ------------------------------------------
Cash                                  $  1,869,788  $      92,900  $   ,962,688
Other Receivables                          117,150         12,196       129,346
Prepaid Expenses                            72,063        (40,602)       31,461
                                      ------------------------------------------
Total current assets                     2,059,001         64,494     2,123,495

Other Assets                                     -         24,349        24,349

Oil & Gas Properties                     1,254,074        (60,530)    1,193,544
Furniture & Fixtures                        28,197          1,069        29,266
Accumulated Amortization                    (4,098)          (543)       (4,641)
                                      ------------------------------------------
Total Property, Plant &  Equipment       1,278,173        (60,004)    1,218,169
                                      ------------------------------------------
Total Assets                             3,337,174         28,839     3,366,013
                                      ------------------------------------------

Accounts Payable                            96,638         68,331       164,969
Accrued Expenses                           163,297         57,358       220,655
                                      ------------------------------------------
Total Current Liabilities                  259,935        125,689       385,624
                                      ------------------------------------------

Asset Retirement Obligation                 53,632         (3,823)       49,809

Share Capital                               89,758              1        89,759
Share Subscription Receivable              (85,000)        (5,000)      (90,000)
Additional Paid in Capital               4,108,200        801,154     4,908,354
Deficit Accumulated during the
   Development Stage                    (1,046,152)      (926,933)   (1,973,085)
Accumulated Other Comprehensive Loss       (43,199)        38,751        (4,448)
Total Shareholders' Equity               3,023,607        (93,027)    2,930,580
                                      ------------------------------------------
Total Liabilities & Shareholders'
  Equity                              $  3,337,174  $      28,839  $  3,366,013
                                      ------------------------------------------
<TABLE>
<CAPTION>

Unaudited Consolidated Statements of Operations

                            Three Months                                Six Months
                           Ended June 30,                                 Ended                     Six Months
                              2006 As                  Three Months    June 30, 2006                Ended June 30,
                             Previously     Impact of  Ended June 30,   As Previously   Impact of       2006
                              Reported       Errors    2006 Restated      Reported       Errors       Restated
                           ----------------------------------------------------------------------------------------
<S>                        <C>             <C>         <C>              <C>              <C>         <C>
Administrative Expense     $      229,432  $    8,190  $      237,622   $     405,313    $  28,721   $     434,034
                           ---------------- -----------------------------------------------------------------------
Loss Before Other Expense        (566,932)     (8,109)       (575,122)       (742,813)     (28,721)       (771,534)
Amortization of Furniture
  & Fixtures                       (2,597)       (282)         (2,879)         (3,807)      (1,341)         (5,148)
Interest Income                       (55)         55               -           9,970       (9,970)              -
                           ----------------------------------------------------------------------------------------
Net Loss                        ($569,584)    ($8,417)      ($578,001)      ($736,650)    ($40,032)      ($776,682)
                           ---------------- ----------- -----------------------------------------------------------
 Basic and diluted loss
  per share                $        (0.01)     ($0.00)         ($0.01)     ($0.02)   $0.00) ($0.02)
</TABLE>

                                       7
<PAGE>

For the impact of the errors on the Cumulative Since Inception April 7, 2004 to
June 30, 2006 refer to the impact of the errors in the Amended Form 10QSB/A at
June 30, 2006 and including the errors noted above.

Unaudited Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                       Three Months                                Six Months
                                      Ended June 30,                                 Ended                     Six Months
                                         2006 As                  Three Months    June 30, 2006                Ended June 30,
                                       Previously     Impact of  Ended June 30,   As Previously   Impact of       2006
                                        Reported       Errors    2006 Restated      Reported       Errors       Restated
                                      ----------------------------------------------------------------------------------------
<S>                                   <C>             <C>        <C>              <C>              <C>         <C>
Operating Activities
Net Loss                                  ($569,584)    ($8,417)      ($578,001)      ($736,650)     ($40,032)      ($776,682)
Amortization of Furniture & Fixtures          2,597         282           2,879           3,807         1,341           5,148
Foreign Currency Translation               (105,476)    105,595             119          (1,530)        4,625           3,095
Change in Other Receivables                 (86,627)     55,271         (31,356)       (110,680)        8,485        (102,205)
Change in Prepaid Expenses                    8,363      19,087          27,450         (14,213)       40,602          26,389
Change in Accounts Payable                  (21,750)     51,442          29,692          32,096       (21,957)         10,139
Change in Accrued Expenses                  158,707     (56,139)         102,568        158,707       (47,551)        111,156
Change in Convertible Debt                                                                            (41,189)        (41,189)
                                      ---------------------------------------------------------------------------------------
Net Cash Used in Operations                (276,270)    167,121        (109,149)       (330,963)      (95,679)       (426,642)
                                      ---------------------------------------------------------------------------------------
Investment Activities
Additions to Capital Assets                (631,682)    225,873        (405,809)       (947,564)       38,961        (908,603)
Additions to Other Assets                         -      (1,288)         (1,288)              -        (4,100)         (4,100)
Change in Other Receivables                       -     (14,475)        (14,475)              -       (14,475)        (14,475)
Change in Accounts Payable                        -    (102,208)       (102,208)              -       126,276         126,276
Change in Accrued Expenses                        -           -               -               -       (44,360)        (44,360)
                                      ---------------------------------------------------------------------------------------
Net Cash Used in Investing                 (631,682)    107,902        (523,780)       (947,564)      102,302        (845,262)
                                      ---------------------------------------------------------------------------------------
Financing Activities
Proceeds on Shares Issued                 1,781,529     (29,797)       1,751,732      2,949,235       876,343       3,825,578
Shares to be Issued                               -           -               -               -      (773,637)       (773,637)
Change in Accounts Payable                  (36,713)     36,713               -         (36,713)       36,713               -
Change in Other Receivables                       -      55,000          50,000               -       (18,000)        (18,000)
Change in Prepaid Expenses                        -      10,000          10,000               -        10,000          10,000
                                      ---------------------------------------------------------------------------------------
Net Cash Provided by Financing            1,744,816      71,916       1,811,732       2,912,522       131,419       3,043,941
                                      ---------------------------------------------------------------------------------------

Net Cash Increase                           836,864     341,939       1,178,803       1,633,995       138,042       1,772,037
Cash Beginning of  Period                 1,032,924    (249,039)        783,885         235,793       (45,142)        190,651
                                      ---------------------------------------------------------------------------------------
Cash End of  Period                      $1,869,788     $92,900      $1,962,688      $1,869,788       $92,900      $1,962,988
                                      ---------------------------------------------------------------------------------------
</TABLE>

For the impact of the errors on the Cumulative Since Inception April 7, 2004 to
June 30, 2006 refer to the impact of the errors in the Amended Form 10QSB/A at
June 30, 2006 and including the errors noted above.



                                       8
<PAGE>

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Kodiak Petroleum ULC, Kodiak Petroleum (Montana),
Inc., and Kodiak Petroleum (Utah), Inc. All intercompany accounts and
transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

The preparation of financial statements in conformity with U. S. GAAP requires
management to make certain estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Although these
estimates are based on the knowledge of current events and actions the Company
may undertake in the future, they may ultimately differ from actual results.
Included in these estimates are assumptions about allowances for valuation of
deferred tax assets. Accounts receivable are stated after evaluation as to their
collectability and an appropriate allowance for doubtful accounts is provided
where considered necessary. The provision for asset retirement obligation,
depletion, as well as management's impairment assessment on its oil and gas
properties and other long lived assets are based on estimates and by their
nature, these estimates are subject to measurement uncertainty and the effect on
the financial statements of changes in these estimates, in future periods, could
be significant. These estimates and assumptions are reviewed periodically and,
as adjustments become necessary, they are reported in earnings in the periods in
which they become known.

Joint Venture Operations
------------------------

In instances where the Company's oil and gas activities are conducted jointly
with others, the Company's accounts reflect only its proportionate interest in
such activities.

Oil and Gas Properties
----------------------

Under the full cost method of accounting for oil and gas operations all costs
associated with the exploration for and development of oil and gas reserves are
capitalized on a country-by-country basis. Such costs include land acquisition
costs, geological and geophysical expenses, carrying charges on non-producing
properties, costs of drilling both productive and non-productive wells,
production equipment and overhead charges directly related to acquisition,
exploration and development activities. Proceeds from the sale of oil and gas
properties are applied against capitalized costs with no gain or loss
recognized, unless such a sale would significantly alter the rate of depletion
and depreciation in a particular country, in which case a gain or loss on
disposal is recorded.

Capitalized costs within each country are depleted and depreciated on the
unit-of-production method based on the estimated gross proved reserves as
determined by independent petroleum engineers. Oil and gas reserves and
production are converted into equivalent units on the basis of 6,000 cubic feet
of natural gas to one barrel of oil. Depletion and depreciation is calculated
using the capitalized costs, including estimated asset retirement costs, plus
the estimated future costs to be incurred in developing proved reserves, net of
estimated salvage value.

An impairment loss is recognized in net earnings if the carrying amount of a
cost center exceeds the "cost center ceiling". The carrying amount of the cost
center includes the capitalized costs of proved oil and natural gas properties,
net of accumulated depletion and deferred income taxes and the cost center
ceiling is the present value of the estimated future net cash flows from proved
oil and natural gas reserves discounted at ten percent (net of related tax
effects) plus the lower of cost or fair value of unproved properties included in
the costs being amortized (and/or the costs of unproved properties that have
been subject to a separate impairment test and contain no probable reserves).

Costs of acquiring and evaluating unproved properties and major development
projects are initially excluded from the depletion and depreciation calculation
until it is determined whether or not proved reserves can be assigned to such
properties. Costs of unproved properties and major development projects are
transferred to depletable costs based on the percentage of reserves assigned to
each project over the expected total reserves when the project was initiated.
These costs are assessed periodically to ascertain whether impairment has
occurred.



                                       9
<PAGE>

Property and Equipment
----------------------

Property and equipment is recorded at cost. Depreciation of assets is provided
by use of a declining balance method over the estimated useful lives of the
related assets. Expenditures for replacements, renewals, and betterments are
capitalized. Maintenance and repairs are charged to operations as incurred.

Asset Retirement Obligations
----------------------------

The Company recognizes a liability for asset retirement obligations in the
period in which they are incurred and in which a reasonable estimate of such
costs can be made. Asset retirement obligations include those legal obligations
where the Company will be required to retire tangible long-lived assets such as
producing well sites. The asset retirement obligation is measured at fair value
and recorded as a liability and capitalized as part of the cost of the related
long-lived asset as an asset retirement cost. The asset retirement obligation
accretes until the time the asset retirement obligation is expected to settle
while the asset retirement costs included in oil and gas properties are
amortized using the unit-of-production method.

Amortization of asset retirement costs and accretion of the asset retirement
obligation are included in depletion, depreciation and accretion. Actual asset
retirement costs are recorded against the obligation when incurred. Any
difference between the recorded asset retirement obligations and the actual
retirement costs incurred is recorded in depletion, depreciation and accretion.

Environmental
-------------

Oil and gas activities are subject to extensive federal, provincial, state and
local environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and may
require the Company to remove or mitigate the environmental effects of the
disposal or release of petroleum or chemical substances at various sites.

Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures that relate to an existing condition caused by
past operations and that have no future economic benefits are expensed.
Liabilities for expenditures of a non-capital nature are recorded when
environmental assessment and/or remediation is probable, and the costs can be
reasonably estimated. To date, the Company has not recognized any environmental
obligations as production has been insignificant and we have not actively
produced since October, 2006.

Income Taxes
------------

Income taxes are determined using the liability method in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date. In addition, a valuation allowance is established
to reduce any deferred tax asset for which it is determined that it is more
likely than not that some portion of the deferred tax asset will not be
realized.

Stock-Based Compensation
------------------------

The Company records compensation expense in the Consolidated Financial
Statements for share based payments using the fair value method pursuant to
Financial Accounting Standards Board Statement ("FASB") No. 123R. The fair value
of share-based compensation to employees will be determined using an option
pricing model at the time of grant. Fair value for common shares issued for
goods or services rendered by non-employees are measured based on the fair value
of the goods or services received. Stock-based compensation expense is included
in general and administrative expense with a corresponding increase to
Contributed Surplus. Upon the exercise of the stock options, consideration paid
together with the previously recognized contributed surplus is recorded as an
increase in share capital.



                                       10
<PAGE>

Foreign Currency Translation
----------------------------

The functional currency for the Company's foreign operations is the Canadian
dollar. The translation from the applicable foreign currencies to U.S. dollars
is performed for balance sheet accounts using current exchange rates in effect
at the balance sheet date, while income, expenses and cash flows are translated
at the average exchange rates for the period. The resulting translation
adjustments are recorded as a component of other comprehensive income. Gains or
losses resulting from foreign currency transactions are included in other
income/expenses.

Revenue Recognition
-------------------

Revenues from the sale of petroleum and natural gas are recorded when title
passes from the Company to its petroleum and/or natural gas purchaser and
collectability is reasonably assured.

Loss Per Common Share
---------------------

Basic earnings/loss per common share is computed by dividing net earnings/loss
by the weighted average number of common shares outstanding for the period.
Diluted earnings/loss per common share is computed after giving effect to all
dilutive potential common shares that were outstanding during the period.
Dilutive potential common shares consist of incremental shares issuable upon
exercise of stock options and warrants, contingent stock, conversion of
debentures and preferred stock outstanding. The dilutive effect of potential
common shares is not considered in the EPS calculations for these periods if the
impact would have been anti-dilutive.


4. PREPAID EXPENSES AND DEPOSITS

Included in Prepaid Expenses and Deposits is an amount of $186,924 (December 31,
2006 - $170,884) representing the Company's share of a refundable Northwest
Territories work deposit with Indian & Northern Affairs Canada.


5. OTHER ASSETS

Other assets represent long term deposits required by regulatory authorities for
environmental obligations relating to well abandonment and site restoration
activities.

                                                           June       December
                                                         30, 2007     31, 2006
                                                         --------     --------

   Alberta Energy and Utility Board Drilling Deposit     $ 26,583     $ 23,808
   Alberta Energy Royalty Deposit                           4,394        4,074
   British Columbia Oil and Gas Commission Deposit         24,103       21,978
                                                         --------     --------

                                                         $ 55,080     $ 49,860
                                                         --------     --------

6. CAPITAL ASSETS
                                                                     Net Book
                                                Accumulated           Value
                                                 Depreciation          June
                                  Cost          and Depletion         30, 2007
                                 ----------------------------------------------
Oil and Gas Properties:

Canada                           $8,338,633        $ 1,476,657      $6,861,976
United States                       589,885           -                589,885
                                 ----------------------------------------------

Sub-total                         8,928,518          1,476,657       7,451,861

Furniture and Fixtures              115,408             31,935          83,473
                                 ----------------------------------------------

Total                            $9,043,926        $ 1,508,592      $7,535,334
                                 ----------------------------------------------



                                       11
<PAGE>

                                                                      Net Book
                                                Accumulated            Value
                                                 Depreciation         December
                                  Cost          and Depletion         31, 2006
                                 ----------------------------------------------

Oil and gas Properties:

Canada                          $2,182,075       $ 1,476,657         $  705,418
United States                      564,835                 -            564,835
                                 ----------------------------------------------

Sub-total                        2,746,910         1,476,657          1,270,253

Furniture and Fixtures              69,564            13,761             55,803
                                 ----------------------------------------------

Total                           $2,816,474       $ 1,490,418         $1,326,056
                                 ----------------------------------------------

During the six months ended June 30, 2007, the Company capitalized $45,169
(December 31, 2006 - $ Nil) of general and administrative personnel costs
attributable to acquisition, exploration and development activities.

Unproved Properties
-------------------

Included in oil and gas properties are costs of $7,857,400 (December 31, 2006 -
$866,152) related to Canadian unproved properties and $589,885 (December 31,
2006 - $564,835) related to United States unproved properties, valued at cost,
that have been excluded from costs subject to depletion.

Ceiling Test
------------

The Company has performed ceiling tests for its Canadian and United States
geographical cost centers and has determined that no impairment exists as at
June 30, 2007. As at December 31, 2006, it was determined that impairment
existed in the Canadian cost center and consequently, a write-down of $1,419,946
was recorded as depletion and depreciation expense.

7. DEBT

Notes Payable

During the second quarter of 2007, the Company received $3,000,000 in advances
from a European lender with whom the Company is negotiating a line of credit
facility. These advances bear interest at 9 1/2% per annum and are unsecured. As
at June 30, 2007, interest of $18,818 has been accrued.

Convertible Debt

Debt of $41,189 as at December 31, 2005 was non-interest bearing and convertible
to common shares of the Company pursuant to the stock for services compensation
plan. A beneficial conversion feature of $808,811 was calculated on the debt for
the year ended December 31, 2005 representing the difference between the
conversion price and the fair value of the common stock at the commitment date.
This amount is recorded as interest expense and an increase in additional paid
in capital. The Company issued 1,000,000 shares in January, 2006 to settle this
debt pursuant to the stock for services compensation plan. Debt was reduced by
$41,189 and Shares Issued increased by $1,000 and Additional Paid-in Capital
increased by $40,189.

8. ASSET RETIREMENT OBLIGATIONS

Changes in the carrying amounts of the asset retirement obligations associated
with the Company's oil and natural gas properties are as follows:

--------------------------------------------------------------------------------
Asset Retirement Obligations, December 31, 2005                  $            -
--------------------------------------------------------------------------------
Obligations incurred                                                     86,193
--------------------------------------------------------------------------------
Accretion                                                                 4,718
--------------------------------------------------------------------------------
Asset retirement obligations, December 31, 2006                          90,911
--------------------------------------------------------------------------------
Obligations incurred                                                     11,796
--------------------------------------------------------------------------------
Accretion                                                                 4,036
--------------------------------------------------------------------------------
Asset retirement obligations, June 30, 2007                      $      106,743
--------------------------------------------------------------------------------



                                       12
<PAGE>

At June 30, 2007, the estimated total undiscounted amount required to settle the
asset retirement obligations was $ 166,551 - (December 31, 2006 - $97,472).
These obligations will be settled at the end of the useful lives of the
underlying assets, which currently extends up to 8 years into the future. This
amount has been discounted using a credit adjusted risk-free interest rate of
7.5% and a rate of inflation of 2.5%.

9. SHARE CAPITAL

Authorized:
June 30, 2007 and December 31, 2006 - 300,000,000 common shares at $0.001 par
value

At the annual general meeting held on July 18, 2006, the shareholders of the
Company voted in favor of increasing the authorized common shares to
300,000,000.

The following share capital transactions occurred during the periods:

--------------------------------------------------------------------------------
Issued                                   Number      Par Value     Additional
                                                                    Paid in
                                                                    Capital
-------------------------------------------------- ------------- ---------------
Balance December 31, 2005                 474,028          $474       $ 834,561
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs(a)     16,000,000        16,000         756,655
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs(b)        933,324           933       1,259,067
-------------------------------------------------- ------------- ---------------
Issued for service(c)                   1,000,000         1,000          40,189
-------------------------------------------------- ------------- ---------------
2:1 Stock split(d)                     18,407,352        18,407         (18,407)
-------------------------------------------------- ------------- ---------------
Issued for service, net of costs(e)     7,500,000         7,500         314,474
-------------------------------------------------- ------------- ---------------
2:1 Stock split(f)                     44,314,714        44,315         (44,315)
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs(g)      1,130,000         1,130       1,766,130
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs(h)        187,050           187         235,254
-------------------------------------------------- ------------- ---------------
Balance December 31, 2006              89,946,468        89,946       5,143,608
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs (h)        30,000            30          38,298
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs (i)       440,000           440         499,560
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs (j)       420,000           420         474,580
-------------------------------------------------- ------------- ---------------
Private Placement, net of costs (k)     2,447,900         2,448       2,777,427
-------------------------------------------------- ------------- ---------------
Balance June 30, 2007                  93,284,368       $93,284      $8,933,473
-------------------------------------------------- ------------- ---------------

Shares to be Issued                         2007                   2006
                                            ----                   ----
                                      Number    Value       Number      Value

Opening Balance                      470,000  $  538,328  16,000,000  $ 773,637
Issued during the period            (470,000)   (538,328)(16,000,000)  (773,637)
Private Placement, net of costs (h)        -           -      30,000     38,768
Private Placement, net of costs (i)        -           -     440,000    499,560
                                     --------   --------  ----------   --------

Closing Balance                            -     $     -     470,000   $538,328
                                     --------   --------  ----------   --------

         (a)  On January 13, 2006, 16,000,000 shares of common stock were issued
              pursuant to two private placements that closed December 22, 2005
              (13,650,000 shares for gross proceeds of $300,000) and December
              30, 2005 (910,000 shares, for gross proceeds of $500,000)
              respectively, recorded as "Shares Issuable" at December 31, 2005
              in the amount of $773,637 (net of share issue costs of $26,363) as
              the share certificates were not issued until January 13, 2006.

         (b)  In January, 2006, the Company closed a private placement for
              933,324 common shares at a price of $1.50 per share for gross
              proceeds of $1,400,000. Share issue costs associated with this
              private placement totaled $140,000.

         (c)  In January, 2006, the Company issued 1,000,000 shares to settle
              debt of $41,189 pursuant to the stock for services compensation
              plan. A beneficial conversion feature of $808,811 was calculated
              on the debt for the year ended December 31, 2005 representing the
              difference between the conversion price and the fair value of the
              common stock at the commitment date. This amount was recorded as
              interest expense and an increase in additional paid in capital for
              the year ended December 31, 2005.



                                       13
<PAGE>




         (d)  On February 20, 2006 the Company's stock split forward by paying a
              stock dividend to our existing shareholders. All shareholders of
              record on February 14, 2006 received 1 dividend share for every
              share they owned amounting to 18,407,362 shares of common stock
              issued.

         (e)  During 2006, the Company issued 7,500,000 common shares, pursuant
              to an S8 registration, for services provided to the Company that
              have been recorded under the provisions of SFAS No. 123R relating
              to transactions with non-employees where the fair value of the
              investor relations services rendered has been recorded as General
              & Administrative Expense and an increase in Additional Paid In
              Capital (less share issue costs of $15,526. The recorded value of
              the transaction was $337,500 and was based on the value of the
              invoices rendered for the services provided and an allowance for
              the lack of liquidity in the market for the Company's common
              shares. These transactions were in the normal course of business
              and agreed to by the non-employees and the Company based on
              negotiation and accordingly had been measured at the exchange
              amounts.

         (f)  On May 1, 2006 the Company's stock split forward by paying a stock
              dividend to our existing shareholders. All shareholders of record
              on April 28, 2006 received 1 dividend share for every share they
              owned amounting to 44,314,714 shares of common stock issued.


         (g)  In June 2006 the Company closed a private placement for 1,130,000
              units at a price of $1.70 per unit for gross proceeds of
              $1,921,000. Each unit entitled the subscriber to one common share
              of the Company and one warrant. Share issue costs associated with
              this private placement totaled $153,740. Each warrant entitles the
              warrant holder to exchange one warrant for one common share at a
              price of $2.70 until June 30, 2008 and for $3.50 until June 30,
              2009.

         (h)  In December 2006, the Company closed private placements for 54,375
              units (217,050 common shares) at a price per unit of $6.40 Cdn.
              ($1.60 Cdn. per share) for aggregate proceeds of $348,000. Each
              unit entitles the subscriber to three flow-through common shares
              and one common share. The flow-through shares entitle the holder
              to a Canadian Exploration Expense deduction under the Canada
              Income Tax Act. Of these shares, 30,000 were classified, net of
              share issue costs of $38,328, as Shares To Be Issued as at
              December 31, 2006 as the share certificates were not issued until
              February, 2007.

         (i)  On December 22, 2006, the Company received proceeds for a private
              placement of 440,000 units at a price of $1.25 per unit that
              closed on February 20, 2007 for gross proceeds of $550,000. Each
              unit entitled the subscriber to one common share of the Company
              and one warrant. These common shares were classified, net of share
              issue costs of $50,000, as Shares To Be Issued as at December 31,
              2006 as the share certificates were not issued until January,
              2007. Each warrant entitles the warrant holder to exchange one
              warrant for one common share at a price at a price of $1.50 until
              December 22, 2008.

         (j)  On February 20, 2007, the Company closed a private placement for
              420,000 units at a price of $1.25 per unit for gross proceeds of
              $525,000. Each unit entitled the subscriber to one common share of
              the Company and one warrant. Each warrant entitles the warrant
              holder to exchange one warrant for one common share at a price at
              a price of $1.50 until February 20, 2009. Share issue costs
              associated with this private placement totaled $50,000.

         (k)  On May 10, 2007, the Company closed a private placement for
              2,447,900 units at a price of $1.25 per unit for gross proceeds of
              $3,059,875. Each unit entitled the subscriber to one common share
              of the Company and one warrant. Each warrant entitles the warrant
              holder to exchange one warrant for one common share at a price at
              a price of $1.50 until May 10, 2009. Share issue costs associated
              with this private placement totaled $280,000.



                                       14
<PAGE>

At June 30, 2007, the following common shares were reserved for issuance:

                                                                      Weighted
                                          Equivalent      Average      Option
                           Exercise        Shares        Years to      Shares
                            Price ($)    Outstanding      Expiry       Vested

Stock Option Plan          $1.28-$1.75   1,805,000          4.45        Nil
June 2006 Warrants         $2.70-$3.50   1,130,000          4.00          -
February 2007 Warrants        $1.50        860,000          1.64          -
May 2007 Warrants             $1.50      2,447,900          1.86          -

Pursuant to private placements in 2006 and 2007, the Company had 4,437,900
warrants outstanding as of June 30, 2007 (December 31, 2006 - 1,570,000). Each
of the 1,130,000 June 2006 warrants entitles the warrant holder to exchange one
warrant for one common share at a price of $2.70 until June 30, 2008 and $3.50
from July 1, 2008 to June 30, 2011. Each of the 860,000 February 2007 warrants
entitles the warrant holder to exchange one warrant for one common share at a
price of $1.50 until February 20, 2009. Each of the 2,447,900 May 2007 warrants
entitles the warrant holder to exchange one warrant for one common share at a
price of $1.50 until May 10, 2009.

The Company has a stock option plan under which it may grant options to its
directors, officers, employees and consultants for up to a maximum of 10% of its
issued and outstanding common shares at market price at the date of grant for up
to a maximum term of five years. Options are exercisable equally over the first
three years of the term of the option. As at June 30, 2007, none of the
outstanding options were exercised. On October 23, 2006, the Company granted
options for 1,000,000 common shares to five directors of the Company. Also on
October 23, 2006 the Company granted options for 280,000 common shares to an
officer of the Company, which options were cancelled in December 2006. On
December 1, 2006, the Company granted options for 125,000 common shares to a
consultant of the Company. During the first half of 2007, the Company granted
options for 680,000 common shares to an officer, a consultant of the Company and
to three senior advisors of the Company.

A summary of the status of the stock option plan is as follows:

                                                                     Weighted
                                                      Number         Average
                                         Expiry     of Option        Exercise
                                          Date       Shares           Price

Balance December 31, 2006 and 2005                         -                -

Options Granted October 23, 2006       Oct 23/11      1,280,000        $ 1.50
Options Cancelled                                      (280,000)       $ 1.50
Options Granted December 1, 2006        Dec 1/11        125,000        $ 1.28
                                                   ----------------------------
Balance December 31, 2006                             1,125,000        $ 1.48
Options Granted January 3, 2007         Jan 3/12        280,000        $ 1.29
Options Granted February 1, 2007        Feb 1/12        100,000        $ 1.35
Options Granted April 2, 2007           Apr 2/12        300,000        $ 1.75
                                                   ----------------------------

Balance June 30, 2007                                 1,805,000        $ 1.49
                                                   ============================


10. STOCK-BASED COMPENSATION

Stock Options

In accordance with Financial Accounting Standards Board Statement ("FASB") No.
123R, the Company uses the Black-Scholes option pricing method to determine the
fair value of each option granted and the amount is recognized as additional
expense in the statement of earnings over the vesting period of the option. The
fair value of each option granted has been estimated using the following average
assumptions:

                                                         2007           2006
                                                         ----           ----

Risk free interest rate                                3.98-4.62%      3.98%
Expected holding period                                  3 years       3 years
Share price volatility                                     75%           75%
Estimated annual common share dividend                      -             -

For options granted during the six months ended June 30, 2007, the fair value
totaled $786,345 (December 31, 2006 - $ 1,082,000). The amount of share-based
compensation expense recorded during the six months ended June 30, 2007 is
estimated to be $ 279,083 (December 31, 2006 - $69,169) and which has been
credited to Contributed Surplus. The balance of the fair value of the options to
be expensed in future periods is $1,520,093 (December 31, 2006 -$1,012,831) over
a vesting period of three years.
                                       15
<PAGE>

Contributed Surplus

2006 stock-based compensation expense                              $   69,169
                                                                   ----------
Balance December 31, 2006                                              69,169
2007 stock-based compensation expense                                 279,083
                                                                   ----------

Balance June 30, 2007                                              $  348,252
                                                                   ----------

11.  INCOME TAXES

At June 30, 2007, the Company's deferred tax asset is attributable to its net
operating loss carry forward of approximately $1,283,000 (December 31, 2006 -
$647,000), which will expire if not utilized in the years 2024, 2025 and 2026.
Of this amount, approximately $400,000 (December 31, 2006 - $397,000) is
attributable to the Company's Canadian operations. As reflected below, this
benefit has been fully offset by a valuation allowance based on management's
determination that it is not more likely than not that some or all of this
benefit will be realized.

For the periods ended June 30, 2007, December 31, 2006 and for the cumulative
period April 7, 2004 (Date of Inception) to June 30, 2007, a reconciliation of
income tax benefit at the U.S. federal statutory rate to income tax benefit at
the Company's effective tax rates is as follows.

                                            2007         2006      Cumulative
                                         ---------    ---------    ----------
Income tax benefit at statutory rate    $  316,000  $ 1,080,000   $ 1,816,000
Permanent Differences                      (47,000)    (132,000)     (459,000)
State tax benefit, net of
 federal taxes                             (17,000)       1,000        (6,000)
Foreign taxes, net of federal benefit            -       12,000        15,000
Change in valuation allowance             (252,000)    (961,000)   (1,366,000)
                                         ---------    ---------    ----------

Income tax benefit at effective rate    $        -  $         -    $        -
                                         =========    =========    ==========

Deferred tax assets (liabilities) at June 30, 2007 and December 31, 2006 are
comprised of the following:

                                                           2007         2006
Deferred tax assets
             Deferred costs                           $   19,000   $  443,000
             Deferred deduction on stock-based
                   Compensation expense                  121,000       24,000
             Net operating loss carryover              1,281,000      647,000
                                                      ----------   ----------

                 Total deferred tax asset              1,421,000    1,114,000

Canadian Deferred Tax liability                           55,000            -
                                                      ----------   ----------


                                                       1,366,000    1,114,000
Less valuation allowance for net deferred tax asset   (1,366,000)  (1,114,000)
                                                     -----------   ----------

Net deferred tax asset                                $        -   $        -
                                                     ===========   ===========


12. LOSS PER SHARE

A reconciliation of the numerator and denominator of basic and diluted loss per
share is provided as follows:

                                       16
<PAGE>
                                          Three Months              Six Months
                                          Ended June                Ended June
                            Three Months    30, 2006   Six Months    30, 2006
                             Ended June  (as Restated) Ended June  (as Restated
                              30, 2007     - Note 2)    30, 2007     - Note 2)
                             ----------   ----------   ----------   ----------

Numerator:
Numerator for basic and
 diluted loss per share

   Net Loss                  $  (647,052) $  (578,001) $ (961,094) $   (776,682)
--------------------------------------------------------------------------------

Denominator:
Denominator for basic loss
 per share
Weighted average
 shares outstanding           92,680,982   73,115,017  91,728,572    48,682,635

Denominator for diluted loss
 per share
Weighted average
 shares outstanding           95,891,140   73,115,017  94,884,524    48,682,635

Basic and diluted
================================================================================
 loss per share              $     (0.01) $    ( 0.01)$     (0.01) $      (0.02)

13. FINANCIAL INSTRUMENTS

The Company, as part of its operations, carries a number of financial
instruments. It is management's opinion that the Company is not exposed to
significant interest, credit or currency risks arising from these financial
instruments except as otherwise disclosed.

The Company's financial instruments, including cash, accounts receivable,
accounts payable, accrued liabilities and notes payable are carried at values
that approximate their fair values due to their relatively short maturity
periods.


14. RELATED PARTY TRANSACTIONS

Officers and Directors of the Company purchased 10,200,000 common shares of the
Company on December 22, 2005 at $0.02 per share for $204,000. These shares were
not issued by the transfer agent until January 13, 2006 and were reflected in
shareholders' equity as part of the caption "Shares to be Issued" at December
31, 2005.

A director of the Company purchased 50,000 common shares of the Company on
December 28, 2005 at $.50 per share for $25,000. These shares were not issued by
the Transfer Agent until January 13, 2006 and were reflected in shareholders'
equity as part of the caption "Shares To Be Issued" at December 31, 2005.

During the year ended December 31, 2006, the Company issued 2,000,000 common
shares of the Company in consideration for corporate development services
rendered to the Company by an individual, whom beneficially owns 9.3% of the
Company. The shares were valued at market price of $.05 per share 90,000 and
were recorded as General and Administrative Expense and an addition to
Additional Paid in Capital.

For the six months ended June 30, 2007, the Company paid $49,610 (2006 -
$41,003), including $9,949 owing as at June 30, 2007 (December 31, 2006 - $ nil)
to Sicamous Oil & Gas Consultants Ltd., a company owned by the President & Chief
Operating Officer of the Company for consulting services rendered to the
Company. These amounts were charged to General and Administrative Expense.

For the six months ended June 30, 2007, the Company paid $26,523 (2006 -
$26,837), including $4,693 owing as at June 30, 2007 (December 31, 2006 - $ nil)
to MHC Corp., a company owned by the Chief Executive Officer of the Company for
consulting services rendered to the Company. These amounts were charged to
General and Administrative Expense.

For the six months ended June 30, 2007, the Company paid $27,377, (2006 - $
nil), including $9,949 owing as at June 30, 2007 (December 31, 2006 - $ nil) to
Harbour Oilfield Consulting Ltd., a company owned by the Vice President -
Operations of the Company for consulting services rendered to the Company. These
amounts were charged to General and Administrative Expense



                                       17
<PAGE>
For the six months ended June 30, 2007, the Company paid $56,374 (2006 - $ nil),
including $8,364 owing as at June 30, 2007 (December 31, 2006 - $ nil) to the
Chief Financial Officer of the Company for services rendered to the Company.
These amounts were charged to General and Administrative Expense.

During the year ended December 31, 2006, the Company paid $61,087 (2005 -
$131,156) to companies which beneficially own 9.3% (2005 - 9.1%) of the Company
for investor relations services. Of this amount, investor relations services in
the amount of $61,087 (2005 - $54,793) are included in Administrative Expenses
and private placement commissions of $ Nil (2005 - $26,363) are included as
share issue costs in Additional Paid In Capital.

These  related  party  transactions  were in the normal  course of business  and
agreed to by the related parties and the Company based on negotiations and Board
approval and accordingly had been measured at the exchange amounts.

As at June 30, 2007 and December 31,  2006,  no other  amounts were owing to any
related parties for services rendered.

15. SEGMENTED INFORMATION

The Company's geographical segmented information is as follows:

                Three Months Ended June 30, 2007  Six Months Ended June 30, 2007
                --------------------------------  ------------------------------
                  U. S.    Canada       Total       U. S.    Canada     Total
                  -----    ------       ------      -----    ------     -----
Revenue         $      -         42          42          -        427        427
Net Loss           9,927    581,645     591,572     12,556    893,058    905,614
Capital Assets   589,885  6,945,449   7,535,334    589,885  6,945,449  7,535,334
Total Assets     678,645  8,920,707   9,599,352    678,645  8,920,707  9,599,352
Capital
  Expenditures    25,050  1,732,883   1,757,933     25,050  6,190,539  6,215,589

               Three Months Ended June 30, 2006  Six Months Ended June 30, 2006
                --------------------------------  ------------------------------
                  U. S.    Canada       Total       U. S.    Canada     Total
                  -----    ------       ------      -----    ------     -----
Revenue         $      -          -           -          -          -          -
Net Loss           2,488    575,513     578,001      2,668    774,014    776,682
Capital Assets   132,000  1,086,169   1,218,169    132,000  1,086,169  1,218,169
Total Assets     139,332  3,226,681   3,366,013    139,332  3,226,681  3,366,013
Capital
  Expenditures         -    405,870     405,870          -    908,603    908,603

16. CHANGES IN NON-CASH WORKING CAPITAL
<TABLE>
<CAPTION>


                         Three     Three      Six         Six       Cumulative
                         Months   Months     Months     Months   Since Inception
                         Ended     Ended     Ended      Ended     April 7, 2004
                        June 30,  June 30,   June 30,  June 30,    to June 30,
                          2007     2006       2007       2006         2007
                      ----------------------------------------------------------
<S>                   <C>          <C>        <C>      <C>           <C>

Operating Activities:
  Accounts Receivable $  19,030   (31,356)   (23,283)  (102,195)     (56,119)
  Prepaid Expenses        3,501    27,450    (23,268)    26,389      (71,163)
  Accounts Payable       22,835    29,692      7,150     10,139      120,555
Accrued Liabilities      30,696   102,658    (39,787)   111,156       33,317
  Convertible Debt            -         -          -    (41,189)        -
                      ---------   -------    --------  ---------    ---------

      Total           $  31,000   128,354    (79,188)     4,300       26,590
                      ---------   -------    --------  ---------    --------
</TABLE>

                                       18
<PAGE>

17. SUBSEQUENT EVENTS

Thunder Acquisition
-------------------

In February, 2007, the Company entered into a letter of intent with certain
shareholders of Thunder River Energy, Inc. ("Thunder") whereby the Company had
agreed to acquire no less than 57% of the outstanding common shares of Thunder
in consideration for options granted to the Thunder shareholders to acquire
6,867,412 common shares of the Company at an issue price of $1.75 per common
share. Thunder is an Alberta company with undeveloped oil and gas properties in
the Northwest Territories of Canada and New Mexico. On July 11, 2007, the
Company entered into a binding letter agreement, superseding the February letter
of intent, with Thunder and CIMA Holdings, Inc.("CIMA"), a subsidiary of
Thunder, under the terms of which the Company will acquire 100% of Thunder's
interest in its EL 413 Exploration License in the Northwest Territories and 100%
of CIMA's interest in their New Mexico properties in consideration for $1
million cash and up to $26 million in common shares of the Company based on a
per share value of $2.00.

The cash consideration will be paid - $100,000 cash as at the date of the letter
of intent, which amount has been paid and $900,000 cash as at the closing date
of a definitive agreement. The common shares consideration will be issued - 7
million shares valued at $14 million as at the closing date of the definitive
agreement and 6 million shares, valued at $12 million if, as, and when certain
performance milestone dates are achieved, including 2 million shares upon
completion of a 2007/08 seismic program by June 30, 2008; 1 million shares upon
the spudding of a shallow depth well (1,500 meters TD) by March 31, 2009; 1.5
million shares upon the spudding of a medium depth well (2,500 meters TD) before
lease expiry in 2009 and 1.5 million shares upon conversion of any part of EL
413 to a Significant Discovery Lease. If, as a result of the Company's
exploration and development activities on the acquired properties, reserves in
place exceed 100 million barrels, then, for each excess 10 million barrels in
place, 100,000 additional shares could be issued, up to a maximum of 5 million
additional shares.

Notes Payable
-------------

Subsequent to June 30, 2007, the Company received an additional $200,000 in
advances under the Notes Payable referred to in Note 7.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

All statements contained herein that are not historical facts, including, but
not limited to, statements regarding the Company's current business strategy,
the Company's projected sources and uses of cash, and the Company's plans for
future development and operations, are based upon current expectations. These
statements are forward-looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; competitive factors; changes in labor,
equipment and capital costs; changes in regulations affecting the Company's
business; future acquisitions or strategic partnerships; general business and
economic conditions; and factors described from time to time in the reports
filed by the Company with the Securities and Exchange Commission. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, which statements are made pursuant to the Private Litigation Reform
Act of 1995 and, as a result, are pertinent only as of the date made.

PLAN OF OPERATION

The Company has carried out the following activities during the year to date
2007 period and during the next twelve months, the Company plans to aggressively
pursue the development of its asset base.

Canada

MANYBERRIES - SOUTHEAST ALBERTA

The Company farmed into these lands which comprise nine sections (5,760 acres)
of undeveloped petroleum and natural gas rights in southeast Alberta. The
Company drilled two wells and recompleted one other well on the Manyberries
property, which earned the Company a 66 2/3% interest in the lands. After
testing multiple formations in each of the wells, no economic production


                                       19
<PAGE>

potential could be attributed. Due to the high cost of development and the
associated risk, the Company will release the nine sections back to the Crown
after the mineral rights expire in the third quarter of 2007.

PROVINCE/GRANLEA - SOUTHEAST ALBERTA

The Company, jointly with a partner, purchased two sections (1,280 acres gross;
640 net) of petroleum and natural gas rights at a provincial land sale on
September 22, 2005.

A 2D seismic program was completed on the property; a well was drilled and
completed to the Sawtooth formation; surface facilities were installed and a
pipeline tie-in was completed. Production commenced in September, 2006. In
October, substantial increase in water rates resulted in the well being shut in.
The well bore has been evaluated and will be abandoned due to having no present
economic production potential. The surface facilities will be sold and the lands
will be further evaluated to determine if there are other prospective drilling
targets.

LUCY - NORTHERN BRITISH COLUMBIA

The Company has a 7% working interest in a well in northern British Columbia,
located forty miles northeast of Fort Nelson, targeting natural gas. The Lucy
test well is located approximately eight miles south of the CDC Mel d-8-I
94-P-04 well which has produced 63 BCF to date.

The Lucy/Highwood Lands (BC P&NG Lease #44104) consist of approximately three
square miles (799 hectares) located in the North Yoyo Otter Park shale basin.
Seismic covering the Lucy prospect indicates a possible Pine Point (Keg River)
lower level reef build up equivalent in age to the nearby Mel, Yoyo, and Sierra
reefs.

The Lucy prospect is in the vicinity of active gas operations. Service and
support facilities are readily available.

The first well was drilled in December 2006. After some difficult drilling
conditions, the lower zones have been abandoned. This property will be evaluated
for further operations.

LITTLE CHICAGO - NORTHWEST TERRITORIES

The Company is Operator of the this project under an original Farm-out agreement
with the two 50% working interest owners of the 200,000 acre Exploration License
413 ("EL 413") in the Mackenzie River Valley centered along the planned
Mackenzie Valley Pipeline. Under the Farm-out agreement, as at June 30, 2007,
the Company had spent approximately $6,800,000 to acquire 2D seismic data on the
farm-out Lands, thus earning a 12.5% working interest in the property. Kodiak
has also processed 50 km of existing seismic data in the fourth quarter of 2006.
Seismic and Gravity Survey data is now being processed and interpreted. Current
plans include an additional winter seismic program which will further define the
project area and will be used to identify potential drilling targets.

During the first quarter of 2007, Kodiak signed a letter of intent to acquire a
majority interest in Thunder River Energy, Inc. ("Thunder"), one of the two 50%
farmors in the project. That letter of intent has been superseded by a new one
subsequent to June 30, 2007 whereby Kodiak will purchase Thunder's 43.75%
interest thereby giving the Company a 56.25% interest in El 413.

FORT MCMURRAY - NORTHERN ALBERTA

Kodiak,  jointly with two  partners,  acquired two blocks of Petroleum & Natural
and Gas ("PN&G") licenses over sixty-four sections of land near Fort McMurray in
northeastern Alberta.

The licenses are for all P&NG Rights from the base of the Woodbend formation to
fifteen meters into the top of the Precambriam section subject to a 2.5% gross
overriding royalty reserved for the Seller in the subject lands. Kodiak's
initial working interest shall be 50%. One other partner will have the remaining
50% working interest.

Western Crown Corporation will have a 10% carried working interest in the
subject lands and in the first two wells drilled. Western Crown shall have the
option to convert its carried working interest into a 1/6 interest received


                                       20
<PAGE>

proportionately from each of Kodiak and EnerPro Energy Corp. until and including
August 20, 2007 where Western Crown makes full and complete payment of its share
of all Joint Venture costs up to the time of election including interest at
Purchaser's average bank prime rate plus three (3.0 %) percent.

A Joint Operating Agreement shall be drafted and agreed between the parties
allowing Kodiak to be operator of one license and EnerPro operator of the other
license. Kodiak shall have first right of operatorship for whichever license it
chooses.

Kodiak and its partner are planning a seismic program for 2007. Along with the
current seismic program a review of seismic shot in 2003 will take place. An
initial review of existing seismic data showed several potential drilling
targets. Following the seismic program, the Company will plan a 2007/08 drilling
program to further evaluate the property.

United States

NEW MEXICO

Under the terms of a new letter of intent the Company has entered into with
Thunder and CIMA Holdings Inc., a subsidiary of Thunder, subsequent to June 30,
2007, the Company will acquire 100% of 55,000 acres in lands located in
northeast New Mexico. The licenses are for all petroleum and natural gas rights
from the surface to basement subject to a 5% gross overriding royalty reserved
for the Vendor.

Natural gas and commercial volumes of CO2, has been found in existing wells in
the area. There is potential for oil and helium resources at shallow depth.
Kodiak plans to conduct an initial seismic and gravity survey program in 2007.
Once completed, the results will be processed and interpreted and used to define
the subsequent drilling program.

The Company plans to re-enter the existing Roxana well at Sofia and drill
additional test wells to evaluate the Sofia and Spear Draw properties. We
anticipate drilling in early 2008. The existing infrastructure offers the
possibility of dynamic short term growth and significant near term cash flow

MONTANA

Under a joint venture agreement, Kodiak paid 100% of the capital costs of the
seismic and a 3 or 4 well drilling program to a maximum of US $600,000 and
thereby earned a 50% working interest in the wells and well spacing, as well as
the right to participate on a 50% working interest basis going forward. Our
partner will remain as the operator of the project.

Our partner has approximately 80,000 contiguous undeveloped acres of petroleum
and natural gas rights in the area, as well as some excess capacity in
facilities and pipelines.

Two wells were drilled in the third quarter of 2006; one is cased for subsequent
evaluation of the multiple zones found and one was abandoned. A third well is
licensed and will be drilled depending upon the results of testing on the first
well. Subsequent to the drilling, any successful wells will be tied into
existing facilities in 2007/08.

Financial Condition and Changes in Financial Condition

The Company had no operating revenues for the six month periods ended June 30,
2007 or 2006, except for $427 in 2007 resulting from a 4th Quarter 2006
operating revenue under-accrual.

Net Loss for the six months ended June 30, 2007 totaled $961,094 (2006 -
$776,682). The loss comprises expenses relating to personnel consulting, office,
general and administration, investor relations, public company expenses, audit
legal and accounting fees, interest and deferred income tax expense.

Liquidity and Capital Resources:

From inception to June 30, 2007, the Company has financed its operations
primarily from the sale of securities and loans from shareholders. During the
second quarter and to date in the third quarter of 2007, the Company has
obtained $3,200,000 in financing from a lender in the form of 9 1/2% Notes
Payable. These notes will be repayable at the time the Company finalizes formal
line-of-credit arrangements with the lender.



                                       21
<PAGE>

As of June 30, 2007, our assets totaled $9,599,352, at cost (December 31, 2006 -
$2,707,075) which consisted of cash and other current assets of $2,008,938 (2006
- $1,331,159); oil and gas properties and equipment of $7,451,861 (2006 -
$1,326,056) and other assets of $55,080 (2006 - $49,860). Our total current
liabilities were $5,172,797 (December 31, 2006 - $859,103) and consisted of
accounts payable and accrued liabilities aggregating $2,172,797 relating to
capital activities during the six months ended June 30, 2007 and notes payable
of $3,000,000. We had asset retirement obligations of $106,743 (December 31,
2006 - $90,911), deferred income taxes of $55,480 (December 31, 2006 - $Nil) and
shareholders' equity of $4,264,332 (December 31, 2006 - $1,757,061).

During the six months ended June 30, 2007, the company raised $3,793,203, net of
issue costs, in private placement financing proceeds. These financings together
with the proceeds of the $3,200,000 Notes Payable have enabled the Company to
finance its on-going capital expenditures and general and administrative
expenses. Additional financing will be required to enable the Company to carry
out the balance of its planned activities for 2007.

RAISING CAPITAL

The Company currently lacks the internal cash flow and capital resources to
fully implement and carry out its 2007 business plans as described herein. We
expect to raise additional capital, either through debt, equity or a combination
thereof. In the event that additional capital is raised at some time in the
future, existing shareholders will experience dilution of their interest in the
Company.

ITEM 3. CONTROLS AND PROCEDURES

During the process of preparing for the Company's third quarter 2006 financial
report the CFO identified errors in the accounting records that originated in
the fourth quarter of 2005, the first quarter ended March 31, 2006 and the
second quarter ended June 30, 2006. The errors arose as a result of a lack of
adequate procedures and documentation necessary to ensure that records were
maintained in reasonable detail to fairly reflect the transactions of the
Company in the start up phase of operations.

After discussing these matters with management the CFO, at that time,
recommended to the Audit Committee that previously reported financial results be
restated to reflect correction of these errors. The Audit Committee agreed with
this recommendation. Pursuant to the recommendation of the Audit Committee, the
Board of Directors determined at its meeting on November 3, 2006, that
previously reported results for the Company be restated. On December 14, 2006
financial statements for the above noted periods were refiled.

Evaluation of Disclosure Controls and Procedures

During the third quarter the CFO, at that time, evaluated the disclosure
controls and procedures and identified a lack of sufficient procedures,
documentation and qualified personnel to ensure the records fairly reflected the
transactions of the Company resulting in a material weakness in the Company's
internal control over financial reporting. Solely as a result of the material
weakness, management concluded that the disclosure controls and procedures were
not effective as of December 31, 2005, March 31, 2006 or June 30, 2006.

Remediation of Material Weakness in Internal Control

During December, 2006 and the first half of 2007, the company has hired a new
Controller and CFO and additional qualified personnel. The new staff have
implemented adequate procedures and documentation necessary to ensure the
records fairly reflect the transactions of the Company.

Under the direction of the Chief Executive Officer and Chief Financial Officer,
we have evaluated our disclosure controls and procedures as currently in effect,
including the remedial actions discussed above, and we have concluded that, as
of this date, our disclosure controls and procedures are effective.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.



                                       22
<PAGE>

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 20, 2007, pursuant to subscription agreements, the Company closed a
private placement with an investor for 420,000 units at a $1.25 price per unit
for gross proceeds of $525,000. Each unit entitled the subscriber to one common
share of the Company and one common share purchase warrant. Each warrant
entitles the warrant holder to exchange one warrant for one common share of the
Company at a price of $1.50 until February 20, 2009. The Common shares were
issued pursuant to Regulation S ("Regulation S") under the Securities Act of
1933, as amended (the "1933 Act").

On May 10, 2007, pursuant to subscription agreements, the Company closed private
placement financings with investors for 2,447,900 units at a price of $1.25 per
unit for gross proceeds of $3,059,875. Each unit entitled the subscriber to one
common share of the Company and one warrant. Each warrant entitles the warrant
holder to exchange one warrant for one common share at a price at a price of
$1.50 until May 10, 2009.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


Item 5. OTHER INFORMATION

None.






                                       23
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

   31.1 - Certification of Chief Executive Officer Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002

   31.2 - Certification of Chief Financial Officer to Section 302 of the
          Sarbanes-Oxley Act of 2002

     32   - Certification of Chief Executive Officer and Chief Financial Officer
          Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

REPORTS ON FORM 8-K

On January 11, 2007 we filed an 8K under item 5.02 Election of Directors and
Appointment of Principal Officers.

On February 15, 2007 we filed an 8K under item 1.01 Entry into a Material
Definitive Agreement; Item 3.02 Unregistered Sales of Equity Securities and Item
9.01 Financial Statements and Exhibits.

On February 26, 2007 we filed an 8K under item 1.01 Entry into a Material
Definitive Agreement; Item 3.02 Unregistered Sales of Equity Securities and Item
9.01 Financial Statements and Exhibits.

On April 17, 2007 we filed an 8K under item 8.01 Other Events

On May 11, 2007 we filed an 8K under item 1.01 Entry into a Material Definitive
Agreement; Item 3.02 Unregistered Sales of Equity Securities and Item 9.01
Financial Statements and Exhibits.

                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                              KODIAK ENERGY, INC.
                                               (Registrant)


Dated: August 14, 2007                           By: /s/  Mark Hlady
                                                 -------------------
                                                 Mark Hlady
                                                CEO, and Chairman








                                       24









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